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The loss of business from the company's largest customer could impact sales and cash flow in 2019.

What happened

XPO said it earned $0.72 per share pro forma in the fourth quarter of 2018 and only $0.62 per share GAAP. Analysts, who usually give their estimates in pro forma form, had predicted the transportation and logistics company would earn $0.83 per share.

XPO also fell short on sales, reporting $4.4 billion in revenue versus the Street's expectations of $4.6 billion. Full-year profit of $2.88 per share (GAAP) on sales of $17.3 billion likewise fell short of analyst estimates.

So what

It gets worse. Sales for the fourth quarter increased 5% year over year, but profits didn't come close to matching that increase. To the contrary, fourth-quarter profit declined 56% year over year -- a big letdown given that full-year profits increased 18% -- faster than sales growth of 12%.

XPO CEO blamed the Q4 miss on "headwinds in France and the UK and a loss of profit in the postal injection business with our largest customer."

Now what

That loss appears likely to impact this year's results, as well. Updating guidance for fiscal 2019, XPO told investors to expect sales to grow only 3% to 5% this year -- as much as $600 million less than the company would have collected but for the cutback in sales to its largest customer (which XPO did not name). Free cash flow, which XPO had hoped would climb to $650 million in 2019, is now expected to fall between $525 million and $625 million -- potentially less than the $551 million generated in 2018.

No wonder investors are worried.

Author

I like things that go "boom." Sonic or otherwise, that means I tend to gravitate towards defense and aerospace stocks. But to tell the truth, over the course of a dozen years writing for The Motley Fool, I have covered -- and continue to cover -- everything from retailers to consumer goods stocks, and from tech to banks to insurers as well. Follow me on Twitter or Facebook for the most important developments in defense & aerospace news, and other great stories besides.